Opinion
No. CV-04-838-BR.
July 26, 2004
MICHAEL P. OPTON, MICHAEL L. GANGLE, Opton Galton, Portland, OR, Attorneys for Plaintiff.
STEPHEN A. REDSHAW, Stoel Rives LLP, Portland, OR, Attorneys for Defendants.
OPINION AND ORDER
This matter comes before the Court on Plaintiff Thrifty Supply Co.'s Motion to Remand (#11) this action to state court. For the reasons that follow, the Court GRANTS Plaintiff's Motion to Remand
BACKGROUND
Plaintiff is a Washington corporation; Defendant Slakey Brothers, Inc., is a California corporation; and Defendant Jeff Black is an Oregon citizen.
On June 16, 2004, Plaintiff brought an action in Clackamas County Circuit Court, Oregon, alleging common law claims for misappropriation of trade secrets, breach of confidential relationship, intentional interference with economic relations, breach of fiduciary duty, and civil conspiracy of unfair competition.
Simultaneously, Plaintiff also filed a motion for a temporary restraining order in the Clackamas County Circuit Court against Defendants. The state court heard oral argument on Plaintiff's motion commencing at 1:30 p.m., June 16, 2004. Defendants appeared through counsel at the hearing to object to Thrifty's motion. At the time of the hearing, neither Defendant had been served with summons.
On June 18, 2004, at 2:46 p.m., Defendants joined in filing a Notice of Removal (#1) of the state court action to this Court based on complete diversity of citizenship of all parties.
Defendant Slakey was served with summons in the state court action before Defendants filed the Notice of Removal. Defendant Black, however, was not served with summons in the state court action until after Defendants filed their Notice of Removal.
STANDARDS
District courts are authorized to exercise original jurisdiction over civil actions in which the matter in controversy exceeds the sum or value of $75,000 exclusive of interest and costs and the parties are citizens of different states. 28 U.S.C. § 1332(a). An action filed in state court may be removed to federal court if the federal court would have had original subject matter jurisdiction over the action. 28 U.S.C. § 1441(a).
An action in which federal court jurisdiction is based solely on diversity of citizenship "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b) (emphasis added).
A motion to remand is the proper procedure for challenging removal. See N. Cal. Dist. Council of Laborers v. Pittsburgh-Des Moines Steel Co., 69 F.3d 1034, 1038 (1995). The removal statute is strictly construed, and any doubt about the right of removal is resolved in favor of remand Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations omitted). The presumption against removal jurisdiction means "the defendant always has the burden of establishing that removal is proper." Id. (citations omitted).
Jurisdiction in a diversity case is determined at the time of removal. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938).
DISCUSSION
The parties do not dispute Defendant Black is, and has been at all material times, a citizen of Oregon. Black was not served formally with summons until after he joined in filing the Notice of Removal to federal court. Defendants, therefore, contend removal of the case to federal court was proper because Black had not been served with summons at the time.
Plaintiff contends this Court should remand this action to state court because (a) Black waived service of summons when he made a general appearance to oppose Plaintiff's motion for a temporary restraining order in the state court action, (b) Black's attorney accepted service of summons on Black's behalf, and ©) Black waived service of summons by voluntarily joining in the Notice of Removal filed in federal court and simultaneously filing a Motion to Dissolve the temporary restraining order previously issued in state court. Accordingly, Plaintiff asserts removal is improper under § 1441(b).
There is no dispute that after Plaintiff commenced its action in state court and before Black was formally served with summons, Black's attorney appeared in state court to oppose Plaintiff's motion for a temporary restraining order. Black's attorney also argued for a higher injunction bond than offered by Plaintiff. Moreover, Black's attorney participated in discussions regarding the need for discovery and the location for taking depositions in preparation for the preliminary injunction hearing that was anticipated following issuance of the temporary restraining order. Black did not present any evidence that he objected to the state court's jurisdiction to issue an injunction that affected him personally. Plaintiff asserts Black, therefore, "appeared in state court . . . and in various ways involved the power of the court and the benefits and protection of Oregon law." See Thoenes v. Tatro, 270 Or. 775 (1974).
Nonetheless, Defendants assert Black took "absolutely no affirmative action to invoke the state court processes." Defendants assert they did not file an answer or any motions, did not file a response in opposition to Plaintiff's motion for a temporary restraining order, and did not sign the protective order entered by the state court judge.
In Belknap v. Charlton, the Oregon Supreme Court held a "voluntary appearance" sufficient to constitute a waiver of defects in service of process was not limited to those circumstances by which a defendant makes an "appearance" in the form of filing of pleadings such as an answer, a demurrer, or a written notice of appearance. 25 Or. 41, 44 (1893). See also Thoenes, 270 Or. 775 (1974). The Belknap court set out "a reasonable rule" to determine whether a defendant's appearance was limited to a special purpose rather than subjecting the defendant to the jurisdiction of the court:
[W]hile a defendant may appear specially to object to the jurisdiction of the court over him on account of the illegal service of process, he must keep out of court for every other purpose, and that any appearance which calls into action the power of the court for any purpose, except to decide upon its own jurisdiction, is a general appearance, and waives all defects in the service of process. . . . The principle to be extracted from the decisions on this subject is that where the defendant appears, and asks some relief which can only be granted on the hypothesis that the court has jurisdiction of the cause and the person, it is a submission to the jurisdiction of the court as completely as if he had been regularly served with process, whether such appearance, by its terms, be limited to a special purpose or not. Id. at 45-46. See also Thoenes, 270 Or. at 780; Marriage of O'Connor, 70 Or. App. 658, 662-63 (1984).
In Thoenes, the Oregon Supreme Court noted Belknap addressed two ends of the spectrum: a special appearance and a general appearance. On the one end, a party who voluntarily appears and seeks relief on the theory that the court has jurisdiction makes a general appearance, and the party thereby subjects himself to the jurisdiction of the court and waives any objection to service of process. On the other end of the spectrum, a party who moves to dismiss on the ground that the court lacks jurisdiction over him makes only a special appearance. Although the court did not resolve specifically the conduct between the two ends of the spectrum that would constitute a general appearance by a defendant, the court concluded "the jurisdiction of the court should not be held to attach for any purpose until the defendant has in some way used the machinery of the court to serve his ends." Id. at 783 (emphasis added).
The thrust of Defendants' argument that Black did not voluntarily appear in the state action and, therefore, did not waive service of process is that Black (1) did not file any pleadings, (2) did not clearly and unequivocally intend to waive his right to remove by opposing Plaintiff's motion for a temporary restraining order, and (3) did not invoke state court processes.
To support their arguments, Defendants cite a number of federal cases for the proposition that a defendant's actions in state court must demonstrate a "clear and unequivocal" intent to waive the right to remove and "merely defending against a temporary restraining order or request for an injunction in state court is not sufficient to constitute a waiver of the right to removal." See, e.g., Resolution Trust Corp. v. Bayside Developers, 43 F.3d 1230, 1240 (9th Cir. 1995); Rothner v. City of Chicago, 879 F.2d 1402, 1418-19 (7th Cir. 1989). The courts in these cases, however, address only whether a defendant waives the federal statutorily created right of removal by an appearance in state court. The courts do not address the fundamental issue as to whether a defendant waives objection to service of process when he voluntarily appears in a state court proceeding, which is the relevant inquiry in this case.
In Marriage of O'Connor, 70 Or. App. at 63, however, the Oregon state court addressed that issue when it held a husband's appearance for the purpose of objecting to a temporary restraining order, without objecting to the court's exercise of personal jurisdiction, "addressed the merits of an issue in controversy." 70 Or. App. 658, 662-63 (1984).
This Court notes there is a presumption against removal jurisdiction, and Defendants bear the burden to establish that removal of this case from state court is proper. See Gaus, 980 F.2d at 566. For the following reasons, the Court finds Defendants have not met that burden. Defendants voluntarily appeared in state court to argue the merits of Plaintiff's request for injunctive relief. Defendants specifically challenged the merits of Plaintiff's motion, the substance of a protective order proposed by Plaintiff, the amount of the injunction bond proposed by Plaintiff, and the details of discovery preparatory to the hearing on a preliminary injunction. Defendants did not argue the state court lacked in personam jurisdiction to enjoin conduct by Defendant Black. The Court, therefore, finds Black voluntarily "used the machinery of the [state] court to serve his ends," made a general appearance in state court, and waived service of summons by his appearance. See Thoenes, 270 Or. at 783.
Such an argument would have not prevailed in light of the fact that Black is an Oregon resident.
Accordingly, for purposes of 28 U.S.C. § 1441(b), the Court concludes Black waived service of summons and was a "served" defendant when he joined with Defendant Slakey in filing the Notice of Removal to this Court. The Court, therefore, holds removal is not proper because Black is an Oregon resident. 28 U.S.C. § 1441(b) (an action is removable "only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.")
Because of its disposition of Plaintiff's Motion on this basis, the Court need not address the other grounds on which Plaintiff challenges this Court's removal jurisdiction.
CONCLUSION
For these reasons, the Court GRANTS Plaintiff's Motion to Remand (#11) this action to state court.IT IS SO ORDERED.